Did Bernstein Call A Qualcomm-NXP Merger Thursday Morning?

Talk about good timing.

In a report released Thursday morning, Stacy Rasgon of Bernstein explored a hypothetical question of "Should QUALCOMM, Inc. QCOM" and if so, should it be NXP Semiconductors NV NXPI?

Several hours after the report was delivered to clients, a Dow Jones report suggested Qualcomm is in talks to acquire NXP and a deal could be done in the next two to three months.

According to Rasgon, NXP often tops the list of companies that Qualcomm should acquire given:

  • NXP's "meaningful" size compared to Qualcomm
  • NXP's end market exposure in automotive, security and mobile payments
  • NXP's offshore location in the Netherlands which suits Qualcomm well as it can unlock its "sizeable" offshore cash balance.

Rasgon said an acquisition of NXP would be "highly" accretive to Quaclomm as much as 30 percent to earnings even without considering incremental costl synergies.

"Our analysis suggests a deal for NXPI appears to be a potentially viable strategy to drive both EPS accretion as well as unlock value from cash on the balance sheet," Rasgon wrote. "That being said, transformative M&A is typically fraught with challenges; accretion on paper would have to be carefully weighed against real risks around integration, execution, and strategic fit. But such an idea does appear worth (cautiously) exploring, pitting possibly high levels of accretion against a frank evaluation of potential execution risks."

Bottom line, Rason stated that a takeout of NXP is "not part of our thesis" but "we would certainly take it if it occurred."

Of particular note, Rasgon cautioned clients that the purpose of the research report is not to actually call for a combination of Quaclomm and NXP, nor do they want to "start the rumor mills spinning."

Accordingly, the quick commentary is an exercise in a hypothetical what if scenario and the timing of takeover reports a few hours later appears to be coincidental.

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Posted In: Analyst ColorNewsRumorsM&AAnalyst RatingsTechBernsteinQuaclomm NXP MergerStacy Rasgon
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